From $90,000 in debt to debt-free in 3 years

Our friends at LearnVest offer sound financial tips and advice for every aspect of life. Check out this first-person account from Stephanie Hood, who paid off $90,000 in debt in just three years.

It’s funny how you can do all of the right things — go to college, get a job — and then one day wake up with crushing debt.

At 26, I was working hard and playing hard in Washington, DC. I thought that I had everything under control — despite living practically paycheck to paycheck, having significant credit card debt and paying the minimum on my student loans.

Luckily, someone special woke me up to the reality of my financial situation. It took a lot of hard work — and some serious creativity — but three years later, I’m almost debt-free. Here’s my story.

The pitfalls of free money

I knew from the outset of my college search that my parents had limited funds, but that didn’t stop me from attending the University of Maryland out-of-state to get an undergraduate degree in anthropology, and the University of Tennessee out-of-state for my master’s in nonprofit education.

I didn’t even try to get scholarships or grants; I funded both degrees with student loans — a common mistake. When student loans are being passed out, it’s like free money. You don’t grasp that you’re going to be 23 and earning a modest income — while trying to pay back loans that total twice your salary.

On top of that, I put some of my living and student expenses on credit cards — entertainment, phone bills, groceries — as well as anything else that I didn’t feel like I had enough money to cover. So by the time that I got my master’s in 2007, I had accumulated tens of thousands in student loan debt, and almost $9,000 in credit card debt. I was just 24 years old.

After graduating, I moved to Washington DC, where I got a job at a nonprofit that paid $50,000 a year — and lived as though I didn’t have any debt. I paid the minimum on my loans, and spent $1,400 a month for a studio apartment in the fashionable Dupont Circle neighborhood. I went out with friends a lot, spending $50 every weekend night — attending countless happy hours.

I honestly — and foolishly — thought everything was fine.

New romance — and a new outlook on money

Three years ago, I met Rob. Beyond his good looks and amazing sense of humor, he’s very grounded and carefully considers every decision. Since I’m more spontaneous and free spirited, we balance each other.

One night six months into our relationship, I told him about my debt. I wasn’t even sure what I owed, but I could ballpark it.

It wasn’t exactly a deal breaker, but he didn’t take it well. “That’s a lot of debt,” he said. “Have you ever thought about how long it would take to pay that off?”

This was a guy who’d gone in-state, his parents had paid for school and he was in a great financial situation. At 26, he was already saving for a house!

That night, I went home and found the Department of Education’s student loan site, where you can pull up your debt, and then I plugged that info into a spreadsheet.

It was a smack in the stomach: I owed almost $90,000.

My private loans had been split, so I had six different ones to pay. And even though I was paying $800 a month in minimums, at the rate I was going, it would take me 112 months (more than nine years!) to pay off my debt — and that didn’t include interest. The loan with the highest interest rate was ridiculous at 9 percent!

But it was Rob who provided me with the biggest motivation to finally deal with my debt problem.

“If you pay off your student loans in three or four years, I will spend that time saving money. I won’t go out, and I’ll stay home with you,” he said. “Then I will have saved enough money so that we can start building a life together.”